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Digital Cash: Past, Present and Future

A brief history of digital cash, and what the future holds for virtual currency

29Apr

Cryptocurrency has had something of a mixed press. Considered by some to be the future of money, others see it as an anarchic scourge to society, a boon to fraud, and a facilitator for some of the more troubling activities taking place on internet.

There are, however, some undeniably powerful people in the former camp, and they’re keen to bring it fully out of the dark recesses of the internet and into the light. Billionaire entrepreneur Richard Branson, for one, is set to throw a summit for 30 of the greatest minds in cryptocurrency at the end of May, while Bitcoin behemoth Coinbase has just launched its services in the UK, citing regulators’ ’forward-looking attitude’.

Cryptocurrency has spent a long time struggling to become truly accepted in the public space, and its evolution into Bitcoin, Dodgecoin, Litecoin, and the other various incarnations we have today, has been more laborious than many will have hoped. Its rapid growth over recent years, however, which has seen the price of Bitcoin rise from $6 in June 2012 to $225 today, has left governments and corporations playing catch up.

Digital cash was conceived in 1982 by visionary cryptographer, David Chaum. His paper, ’Blind Signatures For Untraceable Payments’, proposed an idea to have eCash software on users’ PCs which stored digital money. This digital money was cryptographically signed by a bank, and could be spent at any store which accepted eCash with no need for an account or transmission of card numbers. Chaum then founded DigiCash in 1989, raising $10m in funding to bring his ideas to life, despite just one US bank implementing the currency, who did so only in a three year trial which would eventually prove unsuccessful.

DigiCash went out of business in 1998, having eventually entered into partnerships with a number of major European banks, as customers deserted the firm, ironically due to the loss of anonymity that these partnerships created. At least five other heavily-backed virtual currencies have failed for various reasons since 1990. These include Beenz, which was backed with $100m in funding, and Flooz, which was backed by Whoopi Goldberg.

In comparison to some of its predecessors in the market place, Bitcoin has seen massive growth since its beginnings in 2009. Bitcoin is the first virtual currency to exist without a central repository or single administrator in place, leading it to be classified as decentralized by the US treasury. Its success has also seen it become the first to really enter into the public consciousness. Bitcoin has been the focus of much of the negative press surrounding digital cash, thanks to its connection to black market site Silk Road, and stories of criminal gangs hijacking millions of computers across Europe with malware, using their power to mine the coins.

So what future is there for digital cash? Despite having been conceived of nearly 33 years ago, Government’s and corporations still seem to be struggling to catch up. In August of 2014, the UK Treasury began looking into Bitcoin and cryptocurrency, while a number of companies now employ full time economists to manage their virtual currencies. Whether or not Bitcoin and its current competitors can last amid this intensified scrutiny, or whether it will go the same as way as Flooz and Beenz, is yet to be seen. 

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